Despite the strong fundamentals in the Irish economy, for the Irish real estate sector, an adjustment period is underway. This reflects the transition out of the historically low interest environment. To date, it is difficult to tell where this adjustment lies. Prime yields in Ireland have not yet recorded the level of correction which has been reported in some other jurisdictions such as the US and UK real estate markets. However, one certainty for 2023, is that this correction will develop further in Ireland.

It is anticipated that yields will continue to shift outwards, due to the correction which is taking place across all markets resulting from increasing interest rates and issues surrounding the cost of finance. Further feeding into our view of outward yield movement in 2023 is the availability of more attractive investment sectors, impaired market sentiment, the increased risk represented by downward pressure on rental income arising from the energy crisis, inflationary measures, interest rate increase, and other economic factors.

ESG will remain high on the agenda across the Real Estate industry in 2023, with lenders, developers, and occupiers all striving to meet demands for reduced carbon footprints and increased sustainability measures. These demands are already impacting the commercial and industrial property markets and that impact is likely to grow in the years ahead.

Housing availability and affordability remain at the forefront of the political agenda. Government initiatives are currently beset with the same problems affecting the overall real estate sector, including constrained industry capacity, planning delays, and rising costs. For private sector developers, planning risk in respect of high-density development projects is giving rise to considerable uncertainty.